Market Snapshot

Stocks Finish with Gains

October 09, 2009

U.S. stocks wound up a solid week with modest gains Friday. Equities advanced following a report the August U.S. trade deficit slipped to a lower-than-expected $30.7 billion level from $31.8 billion in July.

The market also got a boost Friday from strength in Web-search giant Google (GOOG). Credit Suisse analyst Spencer Wang boosted his price target on shares of Google to $600 from $475.

On Friday, the 30-stock Dow Jones industrial average finished higher by 78.07 points, or 0.80%, at 9,864.94 -- its highest closing level in a year. The broad Standard & Poor's 500-stock index was up 6.01 points, or 0.56%, at 1,071.49. The tech-heavy Nasdaq composite index gained 15.35 points, or 0.72%, to 2,139.28.

On the New York Stock Exchange, 18 stocks were higher in price for every 11 that declined. Breadth on the Nasdaq was 18-8 positive.

Market players were looking to next week's earnings reports and retail sales and industrial production data to see if recovery picking up steam to justify strong gains since March. The stock market will be open on the Columbus Day holiday while the bond market will be closed.

Treasuries plunged Friday as Bernanke acknowledged that the Fed will eventually have to hike rates.

The battered dollar index was higher on Bernanke's tightening comments.

The Wall Street Journal reported Friday that the biggest story in the world economy is the continuing fall of the U.S. dollar, or at least it is everywhere outside of Washington, D.C., the place most responsible for its declining value. For good reason, says the Journal report, the world is wondering if America has cast the dollar adrift. A passel of Asian central banks -- South Korea, Taiwan, the Philippines and Thailand -- intervened Thursday to stop the greenback's fall against their currencies. European Central Bank President Jean-Claude Trichet also tried to buoy the buck, telling reporters that "A strong dollar is extremely important in the given circumstances."

White House economic adviser Larry Summers, in a Bloomberg TV interview, said Treasury Secretary Geithner made it very clear that "our commitment is to a strong dollar based on strong fundamentals."

Gold futures, which surged to record highs this week, fell on profit taking.

Energy futures were mixed.

"The all-time closing high for the Dow Jones Industrial Average was reached two years ago today at 14,165.53," wrote Pimco strategist Tony Crescenzi in a note Friday. "While we remember it well, the memory is more likely to fade between now and the lengthy period of time it will probably take to return to that level."

Crescenzi said that structural changes to the economy, a shift in risk attitudes across entities, and demographics that favor ownership of less-risky asset classes mean that any move back to the all-time high "will more likely be a grind than a leap."
The Associated Press reported Democrats, confronted with big job losses and no sign the U.S. economy is ready to stand on its own, are working on a growing list of relief efforts, leaving for later how to pay for them, or whether even to bother. Proposals include extending and perhaps expanding a popular tax credit for first-time home buyers, and creating a new credit for companies that add jobs. Taken together, the proposals look a lot like another economic stimulus package, though congressional leaders don't want to call it that. Democratic leaders in Congress and the White House say they have no appetite for another big spending package that adds to the federal budget deficit, which hit a record $1.4 trillion for the budget year that ended last week. But with unemployment reaching nearly 10%, many lawmakers are feeling pressure to act.

Bernanke said Thursday night that the Fed will be prepared to tighten monetary policy when the outlook for the economy "has improved sufficiently." "My colleagues at the Federal Reserve and I believe that accommodative policies will likely be warranted for an extended period," Bernanke said at a Board of Governors conference in Washington, echoing language from last month's meeting of the Federal Open Market Committee.

"At some point, however, as economic recovery takes hold, we will need to tighten monetary policy to prevent the emergence of an inflation problem down the road," Bloomberg News reported the Fed chief as saying.

Bloomberg News said Bernanke's comments come as a global recovery prompts officials around the world to debate the timing of exit strategies. Australia raised rates this week, the first Group of 20 nation to do so since the crisis intensified a year ago. Bank of Japan Governor Masaaki Shirakawa said Oct. 3 the need for the bank's corporate bond purchase programs has eased. In Europe, the Bank of England and the European Central Bank both kept rates unchanged yesterday and have signaled little willingness to immediately rein back emergency measures. China's banking regulator, Liu Mingkang, said in Hong Kong today it's "far too early to talk about an exit."

In economic news Friday, the U.S. trade deficit narrowed fractionally to $30.7 billion in August, from a revised $31.9 billion deficit in July (from -$32.0 billion). Imports dipped 0.6%, while exports inched up 0.2% Excluding petroleum, the deficit was little changed at $14.2 from $14.1 billion. The trade deficit with the Pacific Rim narrowed to $24.7 billion from $25.3 billion, with the balance with China was steady at -$20.2 billion compared to -$20.4 billion in July.

In company news Friday, Spectrum Pharmaceuticals (SPPI) received a Complete Response (CRL) from the FDA regarding its supplemental new drug application for Fusilev (levoleucovorin) for injection to treat advanced metastatic colorectal cancer. The FDA stated that submission did not demonstrate that Fusilev is non-inferior to leucovorin; the agency recommended Spectrum meet with the FDA to discuss options for seeking approval of Fusilev in advanced metastatic colorectal cancer. Spectrum plans to promptly request such meeting to discuss options for Fusilev in this indication.